Definition
The interest rate is the percentage of your loan amount charged annually. Even small rate differences (0.5%) significantly impact your total cost over 30 years. Rates vary based on market conditions, your credit, down payment, and loan type.
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Interest rates are determined by lenders based on credit scores, down payment, loan type, and market conditions. Even a 0.5% difference significantly impacts your monthly payment. Interest rates fluctuate based on Federal Reserve policy and market conditions.
Pro Tip
Shop with multiple lenders and compare interest rates and APRs to ensure you're getting the best deal for your situation.
Example
A $300,000 mortgage at 6% vs. 7% interest creates approximately a $150 monthly difference in principal and interest alone.